Combination of EU ETS and fee and dividend

One of the most sensible ways of putting a price on emissions is the fee and dividend scheme devised by James Hansen of Columbia University.  It is also probably the most acceptable for those on the right which would prefer a fiscally neutral approach.  I hadn’t realised that there is already a fee and dividend scheme in place in British Columbia.  This scheme is described by Dana Nuccitelli’s column in the Guardian: http://www.theguardian.com/environment/climate-consensus-97-per-cent/2013/jul/30/climate-change-british-columbia-carbon-tax?goback=%2Egde_1140337_member_262157446.  It seems to work.  True, one swallow does not make a summer, but even one swallow is better evidence of summer than a waxwing -they visit in the winter.

It would not take much to adapt the EU ETS to a fee and dividend scheme, with all the additional benefits of being an ETS – i.e. definitive emissions targets and a market mechanism.

It just takes two steps:

(1)    To eliminate the free allocation so that all issuance of allowances is by government auction

(2)    To redistribute the auction proceeds to residents of the auctioning country.

The elimination of the free allocation is already in process.  By 2027 it will be gone even under the current rules. 2027 is too long to wait, so that should be speeded up.

Then we need to get governments to agree to give back auction proceeds to their people rather than pocket them.  You probably don’t need to change the EU ETS Directive for this – governments could make the rebate via their own annual budget legislation.

Assume 2 billion EUAs are sold annually.  Assume a price of 10 euro.  Assume 500 million EU residents.  That’s a 40 euro cheque for every woman, man and child in the EU.

So here is a system which is fiscally neutral, has a quantified emissions target, has a market mechanism, and gives everyone a little smile once a year.  Policy makers in member states and Brussels should get working on it immediately.

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One Response to Combination of EU ETS and fee and dividend

  1. Chris Taylor says:

    Hi James,

    I’ve just returned to the UK after a 30 year hiatus to join the fight against climate change and have been very disappointed to find that most people have given up the fight. I’ve even been talking to researchers at the UEA with the same sentiment. (Surely it’s not possible to give up when everything is at stake!)

    I too believe that the EU should adopt Fee and Dividend, in fact I see no hope unless one of the big players does so and then threatens every other country with tariffs unless they take a similar path.

    I’m just testing the water at the moment and haven’t decided whether lobbying, join a protest organisation, start my own party or try to influence the Greens to adopt a more market placed approach.

    What I have found is the environmental movement is so split at the moment, but surely they could all get behind the only reasonable solution on the table, no matter what their political agenda is. I mean – we’re talking about curing climate change!

    I’m confident that the fight can be won for a few reasons. Chatting to people in Norwich about Fee and Dividend, 80% say they would vote for it. Further, no one wants to chance a world 4 degrees hotter for their children or grandchildren.

    So James, I was wondering if we could work on getting Fee and Dividend out there together. And maybe you know of some others in the UK who have a similar approach.

    Chris Taylor
    ta7king@gmail.com

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